Rock Products

AUG 2019

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72 • ROCK products • August 2019 www.rockproducts.com Aggregates Industry Almanac Economic Update T hrough the first five months of 2019, total construction starts on an unadjusted basis were $295.0 billion, down 9% from the same period a year ago, according to accord- ing to Dodge Data & Analytics. On a 12-month moving total basis, total construction starts for the 12 months ending May 2019 were 2% below the amount reported for the 12 months ending May 2018. The 9% decline for total construction starts on an unadjusted basis during the first five months of 2018 was the result of decreased activity for each of the three main sectors. •  Nonresidential building settled back 3% year-to-date, with 8% declines for both institutional building and manufac- turing building that were partially offset by a 3% gain for commercial building. •  Nonbuilding construction dropped 11% year-to-date, as a 24% plunge for public works was countered by a 128% jump by electric utilities/gas plants. The miscellaneous public works category plummeted 54% year-to-date given the comparison to a strong first five months of 2018 that included several large pipeline projects. If the miscella- neous public works category is excluded, public works during the first five months of 2019 would be down a more moderate 7%. •  Residential building year-to-date dropped 12%, with single family housing down 9% and multifamily housing down 19%. By geography, total construction starts during the January-May period of 2019 showed this behavior compared to last year – the South Central, down 1%; the Northeast, down 5%; the Midwest, down 8%; the South Atlantic, down 12%; and the West, down 15%. Additional insight is made possible by looking at 12-month moving totals, in this case the 12 months ending May 2019 versus the 12 months ending May 2018. On this basis, total construction starts were down 2% from the previous period. By major sector, nonresidential building increased 4%, with manufacturing building, up 21%; commercial building, up 8%; and institutional building, down 3%. Residential build- ing dropped 2%, with single family housing, down 2%; and multifamily housing, down 1%. Nonbuilding construction fell 10%, with public works, down 14%; while electric utilities/ gas plants, up 16%. Most Recent Month At a seasonally adjusted annual rate of $757.0 billion, new construction starts in May – the most current month available at press time – climbed 10% from April, according to Dodge Data & Analytics. The increase continues the double-digit swings that were reported during the previous two months, when a 16% hike for total construction starts in March was followed by a 15% decline in April. •  Each of the three main construction sectors contributed to May's 10% gain. Nonbuilding construction rebounded 32% after depressed activity in April, lifted by an especially strong amount of new power plant starts and an $800 mil- lion light rail project in the Minneapolis area. •  Nonresidential building improved 7%, supported by groundbreaking for two very large manufacturing plant projects. Highway and bridge construction eased back 2%. • Residential building edged up 2%, with modest gains for both single-family housing and multifamily housing. "The presence of very large projects frequently causes volatil- ity in the month-to-month pattern of construction starts, and that's certainly been the case during March, April, and now May," stated Robert A. Murray, chief economist for Dodge Data & Analytics. "Amidst the volatility, the pace of construc- tion starts has on balance been sluggish so far in 2019, as activity has been generally lower than the healthy volume witnessed during the first half of last year. For public works, there was some dampening in early 2019 arising from the partial government shutdown, although highway and bridge construction has shown improvement in recent months. For nonresidential building, the boost coming from very large projects so far this year has not been of the same magnitude as what took place last year. For residential building, mul- tifamily housing has pulled back from last year's strength, while single-family housing has been essentially flat. At the same time, there are still positive factors in the current envi- ronment affecting construction. Federal appropriations for fiscal 2019 are in place, and funding support is coming from the state and local bond measures passed in recent years. Market fundamentals for commercial building and multifam- ily housing strengthened during 2018 and early 2019, while interest rates remain low. As 2019 proceeds, it's expected that the shortfall between this year's level of construction starts compared to last year will narrow." Nonbuilding Construction Nonbuilding construction in May was $194.4 billion (annual rate), a 32% increase that followed a 33% slide in April. The electric utility/gas plant category surged 552% in May, bouncing back from a very weak April to a volume more than twice the average monthly pace during 2018. This reflected the start of five power plant projects valued each at $200 mil- lion or more – a $550 million natural gas-fired power plant in Economic Update The Market Is Sending Mixed Signals at the Mid-Way Point in the 2019 Construction Season.

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